Twelve billion iBalls fall into Gizmodo's lap

What's a mobile device prototype worth?

Depends on who you are. If you're Apple, it's priceless. When you tightly control every aspect of the product development process, anything that subverts the message is a potential risk to the brand. Loss of control to a company like Apple is unthinkable. If you're Gizmodo, the answer is $5,000 -- which is the amount the tech blog reportedly paid to an unnamed individual who supposedly found the prototype of Apple's upcoming fourth-generation iPhone in a California bar.

In return for taking the super-secret device public and outing the poor Apple engineer, Gray Powell, who left the device in a bar in the first place, Gizmodo cashed in on an audience bonanza. For better or for worse, online readers are hungry for news about anything remotely connected to Apple. So a full-on overview of an inadvertently leaked next-generation device would be more than enough to whip the masses into a frenzy.

But at what cost? The mysterious individual who apparently picked up the forgotten device at the bar made some excuse about trying to return it to Apple. According to Gizmodo, he called Apple, was given a ticket number, and after being handed off between folks who seemingly didn't take him seriously, was never contacted again. After living in limbo for weeks, the device ended up in Gizmodo's hands.

A lucrative payday

The payoff for all this was lots of eyeballs. And in a world where audience size correlates directly to advertising revenue, this episode has doubtless added a nice bump to Gizmodo's bottom line. As a journalist whose work is often compensated based on audience size, I understand the flurry of possibilities that flowed through the minds of the folks at Gizmodo. You can do the right thing, or you can do the profitable thing. But if the two are mutually exclusive, doing the right thing too often will have you eating ramen noodles while your less morally-upright competition enjoys steak.

I guess it all comes down to honesty. Mysterious bar dude took a device he knew wasn't his, and after a cursory attempt to reunite it with its owner -- and a few weeks of apparent soul searching -- decided to cash in on the unit's obvious market value. Gizmodo bought the device under not entirely legitimate circumstances (did the seller provide a receipt?) with the full knowledge that it was sitting on a potential media frenzy time bomb.

I don't want to sound too much like a doting grandparent, but what we have here is little more than opportunistic theft.

Sure, no one picked the iPhone out of Mr. Powell's pocket. After enjoying some German beer, he updated his Facebook status to that extent, and did a fine job leaving it behind when he headed home. We've all been there before, and in most cases I'd like to believe that the Good Samaritans around us would more often than not choose to ensure said unattended device found its way back to its rightful owner.

But in this case, no one returned it. Along the way, the device was cracked open, sold, and photographed for all the world to see. Some unidentified guy made $5,000 selling something that was not his to sell. A reputable tech blog willingly spent $5,000 on a device whose proper ownership could not be clearly established. While Apple has asked for the device to be returned and Gizmodo has wisely agreed to do just that, the damage has already been done, both to a device that likely isn't as factory-fresh as it was when Mr. Powell last updated his Facebook status, and to the fortunes of a company whose marketing plan for its next major product release has just been turned inside-out.

Gizmodo and its advertisers have clearly had a great week because of all the attention surrounding this surreptitious "reveal," but one wonders whether the long-term impact will make us all feel a little dirty. We are, after all, the reason online and conventional publications go to such great lengths to get the scoop and share the news before everyone else. Winners profit and losers disappear...a process that's been playing out in media since long before the Internet became a factor.

A blog too far

But lines are crossed when money changes hands for goods that may or may not have been either stolen or, at best, obtained under questionable circumstances. It opens up the door to further escalations in the gotta-publish-it-now arms race that seemingly drives today's tech blogosphere. What's next? Will wannabe-scoopsters stake out every bar within a 30-mile radius of Apple's Cupertino headquarters in the hopes of scamming other less-than-security-conscious employees out of their under-development handsets? Will vendors start attaching small incendiary devices that automatically ignite if the individual responsible for their care and feeding drifts further than six feet away? The possibilities are endless, and more than a little frightening, but it's clear that Apple's already-near-maniacal security processes, including chaining devices to desks and keeping engineers in windowless rooms, are about to go into a higher state of overdrive.

So where does Apple go from here? Its stock price took a bit of a hit in the immediate aftermath, but will likely not suffer any permanent damage. And although it's pretty apparent now what the iPhone 4G will be, the market for this device probably hasn't changed much. Okay, maybe it's grown a whisker or too, but for the most part, buyers won't care one way or another that some fairly final product details were leaked a bit early. The ultimate market for this device won't shrink because of this affair.

As far as Mr. Powell is concerned, one hopes he's not unduly punished for his role in this. He made a mistake, but in a world full of nicer people, that mistake might not have led to Gizmodo getting its hands on it. For all Apple's inconvenience, it should thank its forgetful engineer for laying the groundwork for yet another spontaneous round of viral media coverage.

Meanwhile, in an interview today with Nick Denton, the publisher of Gizmodo's parent company Gawker Media, for the Village Voice, the blogger -- who formerly wrote for Gizmodo -- asked Denton whether the scruples of any other publication, such as The New York Times, would have stopped it from running the same story. "Is there a bigger scoop in technology journalism?" Denton responded. "Any decent journalist ought to be willing to sell their mother for a story like this." When pressed about whether he'd sell his own mom, he then added, "My mother's dead." She certainly is.

We're all left to wonder if our demand for instant knowledge of tomorrow's must-have products is forcing some people to play fast and loose with the basic rules of honesty and community.

Carmi Levy is a Canadian-based independent technology analyst and journalist still trying to live down his past life leading help desks and managing projects for large financial services organizations. He comments extensively in a wide range of media, and works closely with clients to help them leverage technology and social media tools and processes to drive their business.